Freight industry ripe for consolidation: Lufthansa Cargo

Singapore
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A senior executive at Lufthansa Cargo believes that the challenges surrounding the air cargo industry in recent years have made it ripe for consolidation.

"This sector really does need consolidation in a way that less capacity is required," says the carrier's vice-president for the Asia Pacific, Helge Krueger-Lorenzen.

He says that if the industry continues to face pressure this year, it will be "healthy for the industry, because it does force some others to make moves, it does force executives to make certain decisions".

"I hope the CFOs of these companies are sending the right signals to their shareholders that this sector does need some consolidation," he adds.

There are signs that some carriers are taking a hard look at their cargo strategies, particularly those based in Asia.

Cathay Pacific Cargo and Singapore Airlines Cargo have already grounded aircraft in an attempt to remove capacity from the market.

Executives from both carriers have also suggested in the last six months that there are "structural issues" that are impacting the global air cargo market.

Last year, Lufthansa Cargo cut its available tonne kilometres by 8.2% as revenue tonne kilometres fell by 8%. Its operating profit fell by 58% to €104 million ($136 million).

Although the conditions are ripe, Krueger-Lorenzen cautions that consolidation may be delayed by the influence of Middle East carriers in the market. He adds that some of those sovereign-owned carriers have "a second or third agenda" apart from delivering value to shareholders.

"Consolidation will only take place so far as these investors are looking at the bottom line of the business they operate," he says.